Talking Points:
- GBP/USD has shown a lack of direction over the past week after a very strong month of March ushered in fresh highs. Short-term resistance is showing at a prior area of support, indicating that the longer-term bullish trend may not yet be ready for resumption.
- The big question around GBP/USD is where the higher-low may come-in before bulls prod another push to the pair’s price action. Below, we look into a zone of potential support from 1.3982-1.4000 that could open the door for bullish continuation in the pair.
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GBP/USD Finds Resistance at Prior Support Zone
Last week we noted the chaotic nature of near-term price action in GBP/USD, and this comes after what turned out to be a very strong month for the British Pound. While GBP/USD spent most of February retracing after the January breakout, March saw strength return as bulls took control to push prices up to a fresh seven-week high. That strength quickly came into question, as a reversal last Tuesday pushed prices right back down to support around 1.4067. That support bounce led into another lower-high, and since then we’ve seen prices return right back towards the 1.4000 psychological level.
GBP/USD Two-Hour Chart: Resistance at Prior Support Zone 1.4067-1.4088
Chart prepared by James Stanley
The longer-term bullish trend in GBP/USD remains attractive, as the bullish channel from 2017 continues to define the pairs intermediate-term price action. The March breakout saw prices break back-above the mid-line of the channel, and this further reinforces the bullish appeal behind the pair as we move deeper into 2018.
GBP/USD Daily Chart: Bullish Channel Remains In Order
Chart prepared by James Stanley
The complication with the current setup in GBP/USD is one of timing, as near-term price action has become rather convoluted. We’ve seen quite a bit of support develop above the 1.4000 psychological level but, to date, bulls haven’t been able to make any ground above 1.4100. This can keep the bullish approach on hold until another area of support may come into play, and there is a zone of interest for such a scenario sitting just underneath current price action. That zone runs from the March 20th swing low of 1.3982 up to the 1.4000 psychological level, and a revisit to support here opens the door for bullish setups with stops set below the swing at 1.3888.
If we do not see support hold above 1.3982, the near-term bullish stance should come into question as we may be looking at a deeper pullback before that longer-term up-trend is ready to advance.
GBP/USD Four-Hour Chart: Support Potential 1.3982-1.4000
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on GBP/USD? Our DailyFX Forecasts for Q1 have a section specifically for GBP/USD. We also offer a plethora of resources on our GBP/USD page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.
--- Written by James Stanley, Strategist for DailyFX.com
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